Workday Results Image credit Pixabay/GeraltWorkday continued delivering solid growth with its fourth quarter and full-year fiscal 2023 results. Both total revenue and subscription revenues rose near to or above 20%. Operating cash flows stood relatively unchanged at $1.66 billion (2022 – $1.65 billion). Loses roses, however, as Workday continues to focus on growth. Operating loss for the full year was $222.2 million (-3.6% of revenues), compared to an operating loss of $116.5 million (- 2.3% of revenues) in fiscal 2022. However, Workday is looking to change that in FY24.

Aneel Bhusri, Co-CEO and Founder Workday (Image Credit Workday)
Aneel Bhusri, Co-CEO and Founder Workday (Image Credit Workday)

Aneel Bhusri, co-founder, co-CEO, and chair, Workday, commented, We closed our fiscal year with another solid quarter, further reinforcing the strength of our value proposition as more organizations continue to select Workday to help manage their people and finances.

“Despite the unpredictable environment, we remain well-positioned to drive the future of work for our more than 10,000 customers thanks to our amazing employees and unique approach to embedding artificial intelligence and machine learning into the very core of our platform.”

  • FY Total revenues were $6.22 billion, up 21.0% year over year.
  • FY Subscription revenues were $5.57 billion, up 22.5% year over year.
  • Q4 Total revenues were $1.65 billion, up 19.60% year over year.
  • Q4 Subscription revenues were $1.50 billion, up 21.7% year over year.

Bhusri also revealed in the analyst call, “…we surpassed the 10,000 customer mark with more than 4,750 of those being our core HCM and finance customers, a true testament to the power of the Workday platform and our ability to address the needs for the offices of the CHRO and CFO.

“Additionally, approximately 629 billion transactions were processed with Workday in fiscal year ’23, an increase of 42% year over year and further proof of the scale that we had reached.” Source Motley Fool.

Profitability draws closer

While Workday continues to see growth, it is also battening down the hatches as the economy worsens. It expects to grow subscription revenue by 17-18% in FY24, with a forecast range of $6.525 billion to $6.575 billion.

Barbara Larson, Chief Financial Officer, revealed, “We currently expect FY ’24 non-GAAP operating margin of 23%. The expected margin expansion is primarily being driven by the scalability of our model, a strong moderation of hiring, and ongoing expense discipline.

“In addition, we estimate the change in server and network equipment useful life will result in a roughly $100 million reduction to the GAAP and non-GAAP cost of subscription revenue in FY ’24, creating a benefit to operating margin of about 150 basis points this year.” Source Motley Fool.

Carl Eschenbach, co-CEO, Workday, added, We have a clear strategy in place heading into fiscal 2024, and our land opportunity with net new finance and HR customers is wide open as we continue to gain ground with both large and medium-sized enterprises across the globe.

“We are doubling down in strategic growth areas by investing in our customer base, focusing on key industries, evolving and investing in our partner ecosystem, and relentlessly focusing on innovation. I am excited for the year ahead as we work together to execute on Workday’s path to becoming one of the largest and most profitable software companies in the world.”

Appointments

Following the announcement that Carl Eschenbach would transition into the role previously held by Chano Fernandez, Workday also announced other leadership changes. The company has appointed Sayan Chakraborty as co-president, a role that Robynne Sisco vacates to take the role of vice chair.

Bhusri commented, Sayan has not only been the driving force behind our innovation strategy and ability to scale our platform to support and enable the world’s largest organizations, but he is a true AI and ML visionary in enterprise software.

“Thanks to Sayan’s efforts, Workday is well-positioned to drive the future of work, and we are pleased to recognize his leadership role across the organization now as co-president. Additionally, we look forward to the continued impact that Robynne will make as vice chair in helping to drive our momentum and advance Workday’s position as a leader in cloud finance.”

Workday also announced the ex-President and CFO of Salesforce, Mark Hawkins, would join the board as an independent director. Hawkins commented, The pace of change we are seeing in the world today, specifically in how organizations manage their people and money, can only be matched by the speed of innovation.

“Workday is meeting the moment as it continues to drive the future of work through AI and ML. I’m looking forward to working with the fantastic leadership team and the rest of the board in bringing Workday’s transformative solutions to more organizations around the world.”

Enterprise Times: What does this mean?

There was no mention in the analyst call about the 3% job layoffs that the company announced at the start of the year. However, Workday is still recruiting. Unlike previous quarters there is a note of caution, with a slow down of hiring and a focus on reducing costs, though this seems sensible financial management rather than outright cost cutting. Effectively Workday seems to be pruning to maximise its growth for 2024.

Analysts responded positively to the results. The share price rose slightly after the close, up 1.07% to 184.76. It is up around 10% on the year, compared to Salesforce, which has fallen 22.51% over the same period.

With Hawkins joining the board, it also has an experienced CFO who saw Salesforce through its period of growth. Workday is generally more cautious in its approach to acquisitions than Salesforce, and there was no mention of acquisitions in the analyst call. It will be interesting to see whether Workday considers anything in FY2024.

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